Attorney General Mayes Sues Amazon Over Secret Ad Surcharge Scheme Harming Small Businesses in Arizona
PHOENIX – Attorney General Mayes announced Arizona has joined the Federal Trade Commission (FTC) and 21 states in suing Amazon alleging the company has for years artificially inflated the prices of ads on its e-commerce platform and misrepresented how the company sets ad prices. The complaint was file yesterday.
"Amazon has built one of the largest advertising businesses in the world on the backs of small business owners who trusted the company to play by its own rules," said Attorney General Mayes. "For years, Amazon told advertisers they were bidding in a fair, second-price auction, while secretly adding hidden surcharges that drove prices higher. Many of these increased costs were passed on to Arizonans. Companies that engage in such deceptive practices must be held accountable."
The bipartisan coalition of plaintiffs alleges Amazon has imposed undisclosed surcharges on its advertising customers, which include more than 500,000 small- and medium-sized businesses that participated in auctions for advertising placements on Amazon.com and its mobile app.
Businesses buy ads on Amazon to have their products prominently displayed to shoppers. For years, Amazon told businesses that ads on its platform were sold through "second-price" auctions, using a combination of the bid amount and relevance to shopper queries. Under that model, a business chooses a maximum price it'd be willing to pay, but if it is the winning (highest) bidder, the business only pays one cent more than the second-highest bid.
Amazon's auction system, however, doesn't allow advertisers to see other bids. The coalition asserts that starting in 2019, Amazon began adding surcharges onto ad prices while continuing to tell ad buyers that it operated a "second-price" auction system. Amazon employees raised concerns, including in an internal memo in 2023 stating that this practice was not "doing the right thing for the advertisers," according to the complaint.
In the complaint, Arizona alleges that Amazon violated the state's Consumer Fraud Act. The Attorney General's Office is asking the court to order Amazon to reform its practices, pay redress and civil penalties for each violation, along with reasonable attorneys' fees.
Joining Arizona in filing the lawsuit, which is being led by the FTC, are the attorneys general of Alaska, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, and Washington.
If you believe you are a victim of consumer fraud or unfair practices, you can file a complaint with the Arizona Attorney General’s Office at www.azag.gov/consumer. If you need a complaint form sent to you, you can contact the Attorney General’s Office in Phoenix at (602) 542-5763, in Tucson at (520) 628-6648, or outside the Phoenix and Tucson metro areas at (800) 352-8431.